The auto dealership buy/sell market continued to roll toward record sales numbers in the third quarter of 2020, putting it on pace to eclipse the record transaction numbers of 2015.
Recent numbers published as part of the Third Quarter 2020 Blue Sky Report by Kerrigan Advisors' highlights much of the activity taking place in such areas as mega-dealer transactions and high-dealership earnings.
“As we predicted, there was no softening of this record-breaking market,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “A 94% year-over-year rise in dealership earnings in Q3 was driven by higher vehicle gross profit margins, reduced operating expenses, limited inventory (which drove up prices) and increased operational efficiency. This created a perfect storm for a white-hot buy/sell environment, one that we predict will surpass the historic levels of 2015.”
In all, some 73 dealership buy/sell transactions were recorded during the third quarter of 2020, with the number of such transactions ballooning to 186 within the first nine months. Even with all the chaos and disruptions caused by the COVID-19 outbreak, 2020 has accounted for the highest level of transaction activity throughout the last six years.
“Of particular note were the high numbers of multi-dealership transactions completed in Q3, including mega-dealer transactions, representing 25% of the buy/sell market for the first nine months of the year,” Kerrigan said. “We expect this trend to continue into 2021.”
Kerrigan Advisors’ second annual Dealer Survey finds a growing number of dealers expressing optimism about prospects of growing business in 2021. Nearly half of these dealers are expecting a rise in buy/sell activity as a result of COVID-19.
Topping the list of most valuable, non-luxury franchises is Toyota. Dealers are more optimistic on valuation and rate the highest Blue Sky multiple amongst non-luxury franchises. Another franchise trending in a positive direction is Ford, where Kerrigan upgraded its multiple outlooks from ‘negative’ to ‘steady.’
“Ford’s third-quarter profits were impressive," Kerrigan Advisors Managing Director Ryan Kerrigan said. "Our dealer survey revealed a significant uptick in Ford dealers’ expectations for valuation improvement."
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